NAA Member News: Brabners – Middle East disruption; key supply chain considerations for automotive businesses
Caroline Litchfield, partner and head of manufacturing and supply chain at Brabners, outlines the key legal and commercial considerations for automotive businesses navigating ongoing disruption across the Middle East.
Ongoing instability across the Middle East is placing renewed pressure on manufacturers that rely on tightly coordinated, international supply chains. For automotive businesses in particular, geopolitical disruption is an operational challenge with growing legal and commercial consequences.
The scale of potential disruption is significant. The Strait of Hormuz carried around 20 million barrels a day of crude oil and oil products in 2025, equivalent to roughly a quarter of the world’s seaborne oil trade. Meanwhile, disruption affecting the Red Sea and Suez corridor continues to show how quickly instability in one region can ripple through international shipping networks and industrial supply chains.
For the automotive sector, where production schedules remain highly sensitive to delays in components, materials and logistics, the impact can be particularly acute. As tensions persist, businesses must move beyond simply monitoring developments and take proactive steps to manage both operational exposure and legal risk.
Cost pressures and reviewing contracts
The financial impact of regional conflict is often felt long before supply chains are directly disrupted. For instance, volatility in the oil market can feed quickly into freight rates, insurance premiums, utilities costs and the wider cost of manufacturing, all placing additional strain on margins.
From a legal perspective, the issue becomes how these increased costs are allocated. Businesses should check their contracts to see whether there are provisions allowing prices to be adjusted. Where contracts are inflexible, increased costs may impact margins or lead to disputes between parties. Suppliers facing sustained cost pressure may seek to renegotiate terms, request temporary relief or, in more serious cases, struggle to perform.
Stress-testing supplier arrangements should therefore include a close assessment of contractual resilience, identifying where cost increases could translate into legal or commercial risk.
Contractual protection
While disruption may be unavoidable, its legal consequences can often be managed through careful use of contractual protections and communication.
Businesses should review contracts that could be affected by disruption, focusing on areas such as delivery timelines, notice requirements and liability. This is because disputes are not limited to missed deliveries. They can also arise from delays, additional charges, changes to shipping routes or disagreements over whether enough has been done by a business to limit the impact.
In these cases, force majeure clauses may offer some protection. These clauses are designed to deal with unexpected events outside a party’s control, such as conflict or natural disasters, which prevent a contract from being fulfilled. However, they are often interpreted narrowly and are usually only applied where an event clearly falls within the wording of the contract and has made performance impossible – not simply more difficult, slower or more expensive.
If force majeure does not apply, businesses may need to look at renegotiating terms or agreeing temporary solutions with counterparties.
With this in mind, clear and proactive communication with counterparties is critical. Maintaining a documented record of decisions and steps taken to mitigate negative outcomes can help manage disputes and protect commercial relationships.
Working with logistics partners
Against this backdrop, the current disruption highlights the vulnerability of global logistics networks. For manufacturers reliant on just-in-time delivery, rerouting is rarely a simple fix. Diversions can add time to journeys, increase shipping costs and disrupt delivery windows.
Manufacturers may not control the route itself, but they should work closely with logistics partners to understand how arrangements are changing and whether new risks are being introduced. That may include exposure to higher-risk jurisdictions or insurance issues where cover depends on agreed transit routes.
Reviewing logistics arrangements with carriers and freight providers can help businesses respond to disruption without creating additional commercial or compliance risk.
Insurance and risk transfer
Insurance remains a key part of supply chain resilience, but businesses shouldn’t assume that existing cover will respond automatically to the intricacies of current geopolitical disruption.
Businesses should review their insurance cover to understand what is and isn’t protected. This includes marine cargo, delay and business interruption policies, and whether they cover issues such as conflict-related losses or supplier disruption.
It is also important to check for any limits, exclusions or conditions that could affect a claim. For example, some policies require early notification or cap how much can be recovered.
Early engagement with brokers and insurers can help clarify the scope of cover, identify gaps and thus reduce the likelihood of disputes in the event of loss.
Preparing for continued uncertainty
The current situation in the Middle East is a reminder that global supply chains continue to operate within relatively narrow tolerances for disruption. For automotive businesses, resilience depends on operational flexibility and a clear understanding of the legal and regulatory frameworks that underpin supply chain activity.
This isn’t just a short-term issue. Recent years have already shown how overlapping challenges, from regional conflict to shipping disruption and wider trade volatility, can combine to create sustained pressure on cost and performance. For a sector with so many international threads like automotive, legal preparedness and supply chain resilience are now inseparable.
By proactively reviewing contracts, insurance arrangements, sourcing strategies and compliance obligations, businesses can better manage risk, protecting their production and better maintaining commercial stability in an increasingly uncertain environment.
